The reintroduction of creditor winding up petitions on companies in Northern Ireland can be expected soon and will lead to creditors pursuing companies in financial distress, a Belfast accountancy and advisory firm has warned.
Insolvency Practitioner Darren Bowman, a Partner at Belfast practice Baker Tilly Mooney Moore, has said the introduction of the Insolvency (Amendment) Rules (Northern Ireland) on Monday 13 March 2023 will pave the way for the lifting of restrictions on the filing of new creditors’ winding up petitions by the Bankruptcy and Companies Master.
A company moratorium procedure had previously been introduced in 2020 to give companies in financial distress the breathing space to explore rescue and restructuring options free from creditor action.
Permanent procedural rules on company moratoriums are required to operate the system effectively and provide certainty to directors, creditors, and insolvency practitioners.
Following the enactment of the Northern Ireland (Executive Formation Etc) Act 2022, and recent guidance from the Secretary of State on Departmental powers in Northern Ireland, the Department of Justice, Department for the Economy and the Lady Chief’s Justice Office have informed Insolvency Practitioners that it is deemed in the public interest to introduce the Insolvency (Amendment) Rules.
Taking effect on Monday 13 March 2023, advisors at Baker Tilly Mooney Moore have said the legislation is likely to be followed by fresh guidance to permit creditors to lodge winding up petitions in the High Court, meaning many more companies being open to pursual.
Darren Bowman, Restructuring & Insolvency Partner at Baker Tilly Mooney Moore said:
“Insolvency practitioners, directors and creditors can expect movement on the restrictions on winding up petitions in the coming months as the Insolvency (Amendment) Rules take effect. This moratorium procedure has been necessary since the onset of the Covid-19 pandemic and throughout these recovery years as companies faced a drop in revenue and consumer confidence, administered the furlough scheme, and eventually navigated the withdrawal of government support measures.”
“We know the various measures put in place by Government to protect businesses during the Covid pandemic will have created a number of ‘zombie’ companies across Northern Ireland which are companies that essentially would not have survived under normal economic conditions. Now, we are likely to see more businesses being pursued by creditors. Though a number of rescue and recovery options exist before the insolvency route, this recent move should come as a warning to businesses in financial distress and their advisors to seek expert advice urgently.”